Question

1. Discuss the taxation of partners in a general partnership.

Answer 1

Partnerships themselves would not be subject to Federal income tax however the partners in the partnership would be taxed upon the share of the income from the partnership. In general partnership the income and losses of the partners must be reported on the personal income tax returns of individual partner’s. Partners will be taxed on the basis of the allocated profit share, regardless of how much of the profit will be actually paid to the each partner. In computation of a partnership’s profit or loss Form 1065 is used. To break down a partnership’s income and deductions category wise the schedule-K is used. To depict the each partner’s allocated share for the numerous types of income and deductions the schedule K-1 is used